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Suppose a stock, not paying any dividend, is currently trading at $50. The annual volatility...

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Finance

Suppose a stock, not paying any dividend, is currently trading at $50. The annual volatility of its price is 31.55%. This implies that in a one-period binomial tree model the stock price will either be $62.5 or $40 in six months. The annual interest rate is 5%. Consider a European call option with a strike price of $50 and maturity in six months.

In the one-period binomial tree model, what's the fair value of the call?

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